And here's the comment
Government of Canada
Comments on Proposed Final Rule
Introduction
The Government of Canada appreciates the opportunity to comment again on the October 30, 2003 Federal Register notice of the proposed final rule on the mandatory country-of-origin labeling (COOL) provisions of the Farm Security and Rural Investment Act (FSRI Act) of 2002.
Without prejudice to our view that the COOL provision of the FSRI Act will have a negative impact on bilateral trade and should be repealed, the following points highlight additional concerns the Government of Canada has regarding the proposed final rule.
The current COOL law is clearly discriminatory, costly and backwards.
a.) COOL will cost at least $3.9 billion with no benefits: The analysis by the Food Marketing Institute of the implementation costs for fish and seafood indicated that the costs to industry of implementation were more than ten times higher than estimated by the United States Department of Agriculture (USDA), with no increased sales of U.S. seafood. The complexities added at all levels of the U.S. food distribution system to implement the proposed final rule with no off-setting benefits make it clear that the rule should be withdrawn. The USDA's estimate of a $3.9 B implementation cost to U.S. industry also does not include costs it will incur in other markets such as the Canadian one, where the first year impact of COOL would bring the total cost of the COOL legislation much higher, through lost exports and added costs to industry to comply with the tracking requirements. It remains unclear whether these statistics take on board all impacts of this law including funding for increased enforcement and surveillance requirements by USDA under the proposed legislation. Most importantly, USDA's own cost-benefit analysis indicates that for all covered commodities, the volume of U.S. exports will decline. If neither U.S. consumers, nor U.S. industry as a whole, are expected to gain from mandatory COOL, then who is?
b.) One step forward, two steps back: Industries in both the U.S. and Canada have worked hard in the 18 years since the Canada-U.S. Free Trade Agreement was signed to make national origin irrelevant in business and consumer decisions. The recent recommendations by the North American Competitiveness Council as part of the Security and Prosperity Partnership only underscore the importance of building on these efforts rather than dismantling them. Implementing the current law undoes the benefits that have been achieved over nearly twenty years and moves North America backwards, decreasing its competitiveness on the world stage. Mandatory COOL is not in the best interests of the U.S. nor of its closest trading partners.
The alleged purpose of COOL is clearly not substantiated.
a.) Product Coverage is Arbitrary. The proposed final rule states that the intent of this law is to provide consumers with additional information on which to base their purchasing decisions. If so, we remain at a loss to understand why only certain foods are covered and why only certain retail outlets that sell food are covered. The only retailers who must label are those who sell fruits and vegetables with an annual value of more that $230,000. Those who don't sell fruits or vegetables, or who sell less than that dollar amount, are exempt.
The effective logic of this law is that only consumers that shop at supermarkets, warehouse clubs and superstores want to know where their food comes from. On the other hand, consumers that shop at butcher shops, fish markets or smaller retail stores are apparently not interested in this same information, nor are consumers eating at retail or institutional food service establishments.
These contradictions and inconsistencies deflate the alleged objective of providing information to consumers. Rather, they only underscore that the program is by nature discriminatory and that support for the program remains primarily driven by anticompetitive interests.
b.) COOL Will Not Make Food Safer. There are no food safety standards or guidelines in the mandatory COOL requirements. Moreover, the USDA's cost-benefit analysis identifies that consumer desires for country-of-origin labelling stem primarily from their concerns about the safety of the food they eat. However, the proposed rule states that mandatory COOL "is not a health safety or animal health measure. COOL is a retail labelling program and as such does not address food safety or animal health concerns."
Given that USDA has acknowledged that mandatory COOL is not an appropriate means of enhancing or enforcing food safety, the Government of Canada is alarmed by the U.S. Government's recent characterization of mandatory COOL as a food safety measure. Its most recent notification to the Technical Barriers to Trade Committee at the World Trade Organization, dated June 26, 2007, indicated that the justification for the COOL measure was, in fact, "protection of consumers and human health." (G/TBT/N/USA/281).
Canada underscores the cooperative work of food safety officials on both sides of the Canada-U.S. border who, together, protect the health and safety of North American consumers. Canada underlines that inspectors currently receive the necessary food safety information to make a safety determination based on sound science and internationallyaccepted standards. The North American food safety system is among the best in the world, and mandatory COOL will neither complement nor enhance this science-based regulatory oversight.
Canada and the U.S. have worked cooperatively to encourage our international trading partners to base their food safety regimes on science and on international standards. The apparent departure of the U.S. Government from this position sets an international precedent which could place at risk Canadian and U.S. exporters' access to international markets.
c.) Informed or Confused? Although the proposed rule supersedes state-administered country-of-origin labelling schemes for covered commodities, the "consumer information" objective is still undermined by COOL's inconsistency with other U.S. country of origin policies. For example, it is conceivable that various products from a single animal would have two or three different labels, each with a distinct meaning. In a case where a Canadian-born steer is raised and slaughtered in the U.S., there may be portions of the animal destined for export which would bear a "Product of USA" label, in conformity with international standards. Cuts destined for the domestic retail market would be labelled "From Canadian cattle raised and processed in the United States."
Trimmings from this same animal that are made into ground beef would likely be mingled with product from a number of different countries, requiring yet a third interpretation of these country-of-origin labelling requirements. Consumers will be confused by the number of different meanings assigned to country of origin.
d.) Definitions of Processing are Problematic. USDA's most recent Federal Register notice states that the USDA's Agriculture Marketing Service (AMS) is seeking comments on whether "the major components of the definition of a processed food item set forth in the interim final rule for fish and shellfish (i.e. change in character and/or combined with other substantive components) [are] also applicable to beef, lamb, pork, perishable agricultural commodities and peanuts." Canada maintains that there exists an adequate and rational definition of processed products under the international country of origin labelling standard that is currently applied in the U.S., Canada, and throughout the international community. The Codex General Standard for the Labelling of Prepackaged Food states that "when a food undergoes processing in a second country that changes its nature, the country in which the processing is performed shall be considered to be the country-of-origin for the purposes of labelling." This definition remains the most practical, and also the most adapted to evolving commercial practice and growing international trade.
Discussions surrounding the various possible definitions of processed products under the mandatory COOL requirements, therefore, are shaped more by specific producer interests than by the goal of providing consumer information. More specifically, the definition of "processed" has become the focus of efforts to either broaden or contract the scope of the law, rather than ensuring consumers receive accurate and consistent information. As in the guidelines, AMS's preferred definition of "processed" in the proposed final rule remains inconsistent across product groupings. The Government of Canada is of the position that the exclusion of canned fish from mandatory requirements in the Interim Rule for fish and shellfish represents an improvement over the Proposed Rule. However, in changes to the Proposed Rule, the Government of Canada encourages the U.S. to maintain a definition of processed based on international standards, whereby any process that changes the nature of a product is considered under the definition of "Processed."
COOL will restructure the entire food distribution system.
a.) Segregation and Sourcing Requirements are Burdensome. In order to provide consumers with year-round availability, and to keep U.S. processing plants running at capacity, products are imported from multiple countries with sources fluctuating constantly. The proposed rule requires that a supplier must document that the origin of a product was separately tracked, while in their control, during any production or packaging processing to demonstrate that the identity of the product was maintained. Recent releases by both the Food Marketing Institute and the American Meat Institute have indicated what the marketplace will expect following implementation of the law, and while a transitional period will ease the pain somewhat, it does not address the real concern, which is that primary producers will face higher costs and tighter margins, and higher costs through the production process will likely be passed onto the consumer. Whether in 2008 or 2009, retail food prices for covered commodities will likely increase to take account of these added costs. Everyone loses.
b.) COOL will Upset the Competitive Balance. The exclusion of poultry under the COOL legislation will upset the already-tenuous competitive balance in the consumer protein market by adding cost disadvantages to other proteins such as, pork and beef, in addition to the existing disadvantage to fish and shellfish, given the mandatory COOL bureaucratic merchandising efforts, resulting in discounting of other proteins, given the limits on consumer expenditures on such products. This will force additional downward price pressure on fish and seafood, pork and beef products.
c.) Cost to Consumers Higher than Necessary. The cost-benefit analysis released by the AMS dismissed the conjecture that most consumers are willing to pay more for countryof-origin information. This has been confirmed in studies of consumer trends. In their 2007 Food and Health Survey, a trended survey examining consumer attitudes toward food, nutrition and health, the International Food Information Council found that of all the information consumers looked for when deciding to purchase or eat a food or beverage, consumers were most interested in the expiration date, nutrition facts panel and the ingredients. Consumers should be treated as they are, not as an ideal of what protectionist interests would like them to be.
d.) Innovation for Growth. The North American meat industry has exploited cost advantages at each stage of production to become an efficient, cost-effective exporter.
The climate of business uncertainty created by this legislation is detrimental to the entire industry. Further, adding unnecessary costs to this process will only make it more difficult to get into competitive markets that are about to re-open to U.S. red meat exports after the events of the past few years.
The continued success of the U.S. and Canadian industries depends on the ability to innovate. Competition drives innovation, which, in turn, drives growth and productivity; competition is what will preserve and enhance these industries' ability to compete in 2007 and beyond, not protectionist policy.
e.) Unnecessary Obstacle to International Trade. Canada has raised its concerns regarding mandatory COOL under the 2002 FSRI Act at several WTO Technical Barriers to Trade (TBT) Committee meetings, including June 2002, March and July 2003, and March and June 2005. At the most recent TBT Committee meeting, in July 2007, Canada expressed the view that the COOL requirements as prescribed in the 2002 FSRI Act would create an unnecessary obstacle to international trade and be inconsistent with the United States' international trade obligations, in particular where less trade restrictive voluntary labelling programs exist. The U.S. has yet to respond to the concerns raised by Canada at TBT Committee meetings.
Product of Canada belongs to Canadians.
The Government of Canada, in partnership with provincial governments, is investing in a strategy designed to build familiarity and distinguish Canadian product in the United States, European Union, Mexico and Japan. While remaining consistent with our international obligations, the Brand Canada strategy is designed to showcase the high quality of Canadian goods and agricultural products, and show that Canada is more than adequately equipped to deliver what consumers need and want.
Canada underlines the fact that the mandatory COOL provisions are clearly not based on the relevant international standards, in particular, the Codex General Standard for the Labelling of Prepackaged Food.
The Government of Canada is opposed to the term "Product of Canada" appearing on the label of products that undergo substantial transformation in the U.S. beyond the control of Canadian processors and Canadian regulatory oversight. Likewise, Canada remains opposed to any U.S. exports into any market bearing a "Product of Canada" statement on the label where the product has been transformed and is clearly no longer Canadian. We would expect the United States Government and U.S. producers to share such concerns in the event other countries adopt similar COOL legislation.
Conclusion
The legitimacy of the basis for these provisions is questionable, and their utility remains unsubstantiated. The USDA has acknowledged that mandatory COOL does not address food safety or animal health concerns, and has yet to provide evidence that mandatory COOL would benefit consumers as a retail labelling program.
As stated by Canada at the July, 2007 meeting of the WTO TBT Committee, in Canada's view, the COOL requirements as prescribed in the 2002 FSRI Act would create an unnecessary
obstacle to international trade and be inconsistent with the United States' international trade obligations, particularly where less trade restrictive voluntary labelling programs exist. In conclusion, we ask that the current requirements for fish and shellfish be repealed, and that plans for mandatory COOL for remaining commodities be abandoned.