Third Party Written Submission of Australia Executive Summary
7 September 2010
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United States - Certain Country of Origin Labelling (COOL) Requirements - (WT/DS384 and WT/DS386) - Third Party Written Submission of Australia Executive Summary [PDF 39 KB]
- The US country of origin labelling requirements (the "COOL measure")
at issue in these proceedings raise significant systemic issues concerning
the legal obligations and rights of WTO Members under the Agreement on Technical
Barriers to Trade (TBT Agreement) and the General Agreement on Tariffs and
Trade 1994 (GATT 1994).
II. The Measure at Issue
- Canada and Mexico have broadly identified the measure at issue to encompass
the 2008 Interim Final Rule and the Vilsack Letter
in addition to the 2009 Final Rule and the 2002 COOL Statute, as amended.
Mexico has also included the Food Safety and Inspection Service Interim Rule.
The COOL measure thus identified covers many commodities and affects every
stage of the supply chain. Relevantly (given Australia's large exports of
muscle cuts and manufactured ground beef), Australia notes ground beef (along
with other ground meats) is subject to very particular COOL requirements under
§65.300(h) of the 2009 Final Rule.
- Australia disagrees with the US contention that Canada and Mexico have failed
properly to identify the measure at issue because they have not addressed
the WTO consistency of all elements of the COOL measure. In this regard, Australia
notes the Panel's statement in EC-Sardines that a complaining party
may elect to "identify and challenge only those offending provisions
of the measure it deems central to its interest in resolving the dispute".
- Like Canada and Mexico, Australia also regards the Vilsack Letter as a measure
which can be challenged in WTO dispute settlement proceedings. It is an act
directly attributable to the executive of a WTO Member. The Vilsack Letter
is an official document that sets out the official position of the US Department
of Agriculture as mandated by the Secretary of the Department and is characterised
by the Secretary as representing the will of the US Congress.
III. The Agreement on Technical Barriers to Trade
A. Definition of Technical Regulation
- Australia considers the COOL measure meets the three criteria identified
by the Appellate Body in EC - Asbestos required to fall within the
definition of a "technical regulation" under Annex 1 of the TBT
Agreement, as it relates to named "covered
commodities", provides for labelling requirements (as referred to in
the definition of a technical regulation in Annex 1), and is of binding or
- Australia notes Mexico directly addresses the mandatory nature of the Vilsack
Letter. The United States challenges Mexico's characterisation of the letter
as mandatory. In Australia's view, Mexico is correct in asserting that how
the US Department of Agriculture characterises the Vilsack Letter should not
be determinative of its character. Instead, a critical question for the Panel
is whether industry views this letter as mandating action.
B. Article 2.1 of the TBT Agreement
- There is limited direct guidance from WTO Panel and Appellate Body Reports
on the application of Article 2.1 of the TBT Agreement. However, Australia
believes the Panel can be informed by the interpretation of the phrases "like
product" and "treatment no less favourable" in GATT Article
- Australia notes the US argument that Canada and Mexico's "like product"
analysis is deficient because the subject of the COOL measure is meat and
not livestock. Australia disagrees with this interpretation and believes Article
2.1 should be applied to country of origin labelling requirements, so as to
encompass "like products" that, at whatever point of the supply
process, are required to be identified for the purposes of labelling the end
product. In other words, the application of the COOL measure to all early
stage products, whether livestock, muscle cuts or beef trimmings used in ground
beef, should be subject to Article 2.1.
- In Australia's view, both Canada and Mexico have clearly established that
live cattle, and in the case of Canada, live hogs, are "like products"
to US live cattle and hogs.
- Australia also submits that imported beef trimmings used for processing
or grinding into ground beef in the United States are like products to domestic
(US) beef trimmings. Imported beef trimmings have the same properties, nature
and quality as the US product, and the same end uses as US beef trimmings,
as both are processed into ground beef. Finally, Australia also notes that
imported beef trimmings and US beef trimmings that are processed into ground
beef are classified under the same subheading 0201 and 0202 under the Harmonised
System of Tariff Classification.
- The objective of the "treatment no less favourable" requirement
is to provide "equality of opportunities" for imported goods.
As part of this analysis, it is necessary to examine whether the COOL measure
"modifies the conditions of competition in the relevant market to the
detriment of imported products".
- On its face, the COOL measure provides for formally identical treatment
of imported product as the same requirements to identify the origin of the
product apply equally to domestic product. However, the COOL measure has the
potential to accord different treatment to imported product that amounts to
less favourable treatment within the meaning of Article 2.1 of the TBT Agreement
because it results in additional operational costs on imported product.
- Australia does not object to identifying imported product on labels and
does not agree with Mexico's claim that country of origin labelling measures
"are inherently protectionist and discriminatory".
As the United States submits, "there is nothing about country of origin
labelling that is inherently unfavourable to imported products".
At times it may even favour imported product. Australia maintains its
own mandatory country of origin labelling requirements and as an exporter
of many products to countries with country of origin labelling requirements
seeks to ensure such requirements do not hinder international trade. Australia
notes many WTO Members maintain country of origin labelling requirements.
- However, Australia agrees with Mexico's claim that the COOL measure discriminates
"by virtue of its design, structure and application".
Australia's concerns focus on the higher cost burdens the requirements place
on the use of imported product throughout the chain of supply. The COOL requirements
applicable to ground beef are an example of such de facto discrimination,
as labelling of all possible countries of origin in accordance with the 60
day inventory allowance could distort the market in favour of domestic product
and is likely to result in discrimination against imported product.
- Should the Vilsack Letter be found to be a "technical regulation",
Australia agrees with Canada's assessment that the effect of the labelling
practices in the letter "would severely curtail the ability to commingle
meat from various countries of origin".
Both production step labelling and extending coverage to processed meats would
impose higher costs where imported product is used. Further, a reduction in
the ground meat inventory allowance to 10 days as set out
in the Vilsack Letter (from the 60 day requirement contained in the 2009 Final
Rule) would reduce the minimal flexibility currently available to processors.
There would be a corresponding increase in compliance costs relating to traceability,
record keeping and packaging or other forms of labelling as labels would have
to be changed more frequently.
C. Article 2.2 of the TBT Agreement
- Article 2.2 of the TBT Agreement grants Members the right to adopt technical
regulations for the purpose of fulfilling legitimate objectives. Australia
submits the correct analysis under Article 2.2 involves examination of:
- whether the objective of the measure at issue is a legitimate objective;
- whether the measure at issue is more trade-restrictive than necessary
to fulfil a legitimate objective, which in turn involves an assessment
- whether the measure is trade-restrictive;
- whether the measure is to fulfil a legitimate objective; and
- whether there are other reasonably available alternatives that may
be less trade-restrictive while still fulfilling the legitimate objective
at the level of protection the Member considers appropriate; and
- the risks non-fulfilment [of the legitimate objective] would create.
- Firstly, Australia submits that an examination of the legitimacy of an objective
is confined to an examination of whether the objective put forward by the
respondent is legitimate within the meaning of Article 2.2. The text of Article
2.2 provides that legitimate objectives include, among other things, the prevention
of deceptive practices and the protection of human health and safety. Article
2.2 does not expressly restrict what might be legitimate objectives; the list
is not exclusive. The United States has put forward the provision of consumer
information so as to minimise consumer confusion as the legitimate objective
of the COOL measure. Australia regards enabling
consumers to identify the source of a product a legitimate objective for the
purposes of Article 2.2.
- Second, Australia considers that Article 2.2, in requiring that a challenged
measure must be necessary "to fulfil a legitimate objective", means
that the measure must fulfil or at least have the capacity to fulfil, the
legitimate objective. The relevant question in this dispute is whether the
COOL measure does carry out, or has the capacity to carry out, its stated
objective of providing accurate additional consumer information.
- In Australia's view, Canada has identified aspects of the COOL measure that
do not appear to achieve that stated objective, particularly in the labelling
of ground beef. In some respects, the COOL
measure can in fact result in misleading and inaccurate information. In particular,
the 60 day inventory allowance could result in inaccuracy, as the label could
identify the origin of products not in fact used in the ground beef.
- Third, as noted by Canada and Mexico, GATT disciplines on the use of restrictions
are meant to protect not "trade flows", but rather the "competitive
opportunities of imported product". Trade-restrictive
measures therefore include those that impose any form of limitation, discriminate
against or deny competitive opportunities to imported product. In Australia's
view, the COOL measure limits trade by imposing recordkeeping and segregation
costs which are likely to be greater when imported product is used and thus
impact on the competitive opportunities of imported product.
- Australia notes that elements of the "necessity" analysis developed
under GATT Article XX are similar to the elements contained in the language
of Article 2.2 of the TBT Agreement. Applied to Article 2.2, establishing
the necessity of the trade-restrictive elements of the COOL measure may require
consideration of the extent to which the trade-restrictive elements make a
contribution to the legitimate objective or contribute to the realisation
of the end pursued: the greater the contribution the more easily the trade-restrictive
elements of the measure might be considered necessary.
- Thus, with respect to ground beef, the COOL measure does not appear to fulfil
its objective and further, may be more trade-restrictive than necessary given
the reasonable availability of other alternatives.
- One possible alternative would require labels to identify "domestic"
or "imported" product (without specifying the particular country
of origin). This greater flexibility would enable processors to use imported
product without needing to segregate product by country of origin or adjust
recordkeeping practices to avoid financial penalties under the COOL measure.
- In summary, Australia considers that the trade-restrictive aspects of the
COOL measure are not necessary to fulfil the stated objective of providing
accurate consumer information and that the objective of providing consumer
information could be fulfilled by the less trade-restrictive alternative for
ground beef outlined above.
D. Article 2.4 of the TBT Agreement
- Mexico identifies the Codex General Standard for the Labelling of Prepackaged
Foods ("CODEX-STAN 1-1985") prepared by the Codex Commission
as a "relevant" international standard upon which the COOL measure
should be based. Australia queries whether the purpose of the CODEX-STAN 1-1985
is relevant or bears upon the COOL measure, which is not intended directly
to address misleading or deceptive labelling practices (though it may complement
- In the alternative, should the Panel find that CODEX-STAN 1-1985 is a relevant
standard that should have provided the basis for the COOL measure, Australia
considers that CODEX-STAN 1-1985 is unlikely to be effective or appropriate
in all cases to fulfil the legitimate objective of providing accurate consumer
IV. The General Agreement on Tariffs and Trade (GATT 1994)
- Australia notes the three elements that must be satisfied to establish a
violation of GATT Article III:4: that the imported and domestic products are
"like products"; that the measure at issue is a "law, regulation,
or requirement affecting their internal sale, offering for sale, purchase,
transportation, distribution, or use"; and that the imported products
are accorded "less favourable treatment" than that accorded to like
- As under Article 2.1 of the TBT Agreement, Australia considers that the
COOL measure has the potential to impose higher cost burdens on the use of
imported product throughout the chain of supply and therefore provides less
favourable treatment to imported product contrary to Article III:4 of GATT
- In Australia's view, contrary to the national treatment obligations in Article
2.1 of the TBT Agreement and Article III:4 of GATT 1994, the COOL measure
has the potential to detrimentally affect the conditions of competition so
as to discriminate against imported product, resulting in treatment less favourable
for such products.
- Furthermore, Australia believes the COOL measure is inconsistent with the
obligation set out in Article 2.2 of the TBT Agreement, in that the trade-restrictive
nature of the COOL measure is not necessary to fulfil its objective of providing
accurate consumer information, given less trade-restrictive and reasonably
available alternatives, including that identified by Australia in relation
to ground beef.
- US Secretary of Agriculture Thomas J. Vilsack's letter to Industry Representatives dated 20 February 2009.
- Panel Report, EC - Sardines, para 7.34.
- Appellate Body Report, EC - Asbestos, paras 66-70, cited also in Appellate Body Report, EC-Sardines, para 176. See Canada's First Written Submission, paras 71-74 and Mexico's First Written Submission, paras 238260.
- US - Section 33 7 of the Tariff Act, para 5.11: see Canada's First Written Submission, paras 87 and 88 and Mexico's First Written Submission, para 217, with reference to the Appellate Body Report, Korea - Various Measures on Beef, para 137 and Appellate Body Report, Dominican Republic - Import and Sale of Cigarettes, para 93.
- Appellate Body Report, Korea - Various Measures on Beef, para 137.
- Mexico's First Written Submission, para 5.
- US' First Written Submission para 141.
- Mexico's First Written Submission, para 5.
- Canada's First Written Submission, para 28.
- US' First Written Submission, para 206. The United States notified the "objective and rationale" as "consumer information" in its amended Notification to the Committee on Technical Barriers to Trade: G/TBT/N/USA/281/Add.1, 7 August 2008.
- Canada's First Written Submission, paras 178-180.
- Canada's First Written Submission, para 184 and Mexico's First Written Submission, para 306 citing Panel Report, EC - Bananas III (Article 21.5 - Ecuador II), at para 7.330 and Panel Report, EC - Bananas III (Article 21.5 - US), at para 7.677
- Appellate Body Report, Korea - Various Measures on Beef, paras 160-163.
- Appellate Body Report, Korea - Various Measures on Beef, para 133.