'COOL' is a lingering hot mess

by Steve Kay
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Waiting for a court decision can be nerve-wracking. Getting a decision against you can be devastating. So it proved for opponents of the US Dept. of Agriculture’s new country-of-origin-labeling (COOL) rule. Nine North American meat and livestock groups asked a US federal judge on Aug. 27 to issue a preliminary injunction to block the enforcement of the rule.

But the judge turned down their request in a Sept. 11 decision.

This almost guarantees that the mess around COOL will continue. The plaintiffs say they will appeal the decision on the grounds that the judge applied the wrong legal requirements regarding the First Amendment issue and that of irreparable harm. But their appeal is unlikely to succeed, based on US District Judge Ketanji Brown Jackson’s ruling. She categorically rejected all of the groups’ legal arguments and the claims of irreparable harm.

Not surprisingly, Jackson told the plaintiffs that their issues with the rule must be solved in Congress rather than the courts. This suggested the judge will not rule against COOL when the plaintiff’s lawsuit comes to trial.

Yet, Congress has shown, to date, no inkling of being interested in amending the COOL law. It will not act in any way until after Canada and Mexico’s complaint against COOL to the World Trade Organization reaches its conclusion. This is not expected until late next year at the earliest.

Even then, the COOL saga will drag on. Should the WTO rule in favor of Canada and Mexico, the US will appeal, or vice versa. If the former prevail, they will ask the WTO for permission to apply punitive tariffs on a multitude of US goods. Only then might Congress feel compelled to act, and this might not be until well into 2015. Only then might the legislative fix of the COOL law come that Canada and Mexico also believe is the only “ultimate” solution to the issues around COOL.

More immediately, denial of the injunction means retailers will have to rush to re-label their fresh-meat products to bring their labels into compliance by Nov. 23. That’s when USDA will start enforcing its rule, which was implemented May 23.

Retailers up until now have continued to use origin labels based on USDA’s previous COOL rule. They had obviously hoped that an injunction would halt the enforcement of the new rule.

However, as noted earlier, there still remains the possibility that the WTO will eventually rule against the COOL rule. This would mean that retailers and their suppliers will have spent hundreds of millions of dollars for nothing. USDA’s Agricultural Marketing Service (AMS) last May said the new rule would have a midpoint cost of $123 million per year.

Retail issues

Of particular concern is whether retailers decide to simplify their labeling requirements by using only the label that reads “Born, Raised and Slaughtered in the United States.” Retailers have already expressed their alarm about the word “slaughtered” being on the label. The word must appear on all labels.

For example, meat from Canadian animals imported for slaughter must be labeled as “Born and Raised in Canada, Slaughtered in the United States.” Beef from a Mexican-born animal finished in the US must be labeled as “Born in Mexico, Raised and Slaughtered in the US.” No commingling of muscle cuts of mixed origins is allowed, which is likely to have the most impact on the US beef supply.

All this raises questions about the effect on the price of beef and pork sold in the US. AMS back in May estimated that the loss of commingling would add $7.16 per head for cattle and $1.79 per head for hogs at the packer/processor level.

Estimated costs at the retail level were $0.05 per lb. for beef and $0.045 per lb. for pork. But AMS did not evaluate the consequences of retailers moving to only a 100 percent US-origin label. Should this occur, the price of US-only muscle cuts would increase even more.

The price of ground beef might not be affected as the loss of commingling applies only to muscle cuts. This might force retailers to sell even more ground beef and fewer muscle cuts.

Another consequence might be to force more beef and pork derived from foreign-born animals to be diverted from retail to foodservice accounts and to exports.

No wonder many in the industry say that COOL is a “mess” that just won’t go away.

Steve Kay is editor and publisher of Petaluma, Calif.-based Cattle Buyers Weekly (www.cattlebuyersweekly.com).

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