On 11 March 2024, Secretary Tom Vilsack of the U.S. Department of Agriculture (USDA) announced the final rule governing a voluntary “Product of USA” labelling measure that will enter into force on 1 January 2026 with respect to meat, poultry, and egg products.  Under the new rule, all processing steps — from birth of livestock animals through raising, slaughtering, and processing — must occur in the United States for the finished products to qualify for use of the label.

This is not a mandatory country of origin labeling (MCOOL) measure like the previous rule that Secretary Vilsack introduced in 2009. That rule was successfully challenged by Mexico and Canada in the World Trade Organization (WTO) (see DS384 and DS386). Rather, the new rule is voluntary (VCOOL). This is an important distinction.

To comply with the 2009 MCOOL, domestic and imported animals and meat had to be segregated throughout the US production chain. This segregation significantly increased the costs to carry Mexican and Canadian livestock (cattle and hogs), resulting in reduced demand for them in the US market. In turn, this adversely impacted the integrated Mexico-Canada-United States market for livestock and meat. In that market, the vast majority of Mexican and Canadian livestock exports were destined for the United States, but they accounted for only a small percentage of total livestock processing in the United States. This created a situation in which the lowest-cost approach for U.S. livestock processors to maintain competitiveness with one another was to avoid imported livestock in their supply chains.

It is unclear whether the new 2024 VCOOL will adversely impact supply chains from Mexico and Canada. The impact may depend largely on how the US market responds to the rule. The increased costs of complying with the new rule may discourage the large processors and the grocery chains that they supply from adopting the voluntary label. However, if grocery chains can pass those costs on to consumers without adversely impacting their competitiveness in the retail market — where, for example, consumers perceive greater value and are willing to pay extra for products bearing the label — adoption may spread throughout the market. This will not be known until the rule enters into force.

If grocery chains begin demanding a “Product of USA” label, the 2024 VCOOL may de facto operate like an MCOOL measure. This is what happened with the “Dolphin Safe Tuna Label” in the United States – Tuna II (Mexico) dispute (see DS381). Although superficially voluntary, the tuna label de facto operated like a mandatory label. It is possible that the new VCOOL will be used primarily by smaller local processors who source their inputs locally or for higher-priced niche products rather than mass market products. If this is the case, it is unlikely to adversely impact imported livestock.

The USMCA, which replaced the NAFTA, incorporates by reference the WTO Agreement on Technical Barriers to Trade, which was at the core of the WTO MCOOL and Tuna labelling disputes. Thus, the current appellate review impasse in WTO dispute settlement should not affect the application of the WTO rules to the new labeling measure.

Tereposky & DeRose LLP regularly provides advice and acts as counsel in international trade disputes, including WTO and USMCA dispute settlement proceedings. Our lawyers appeared in Geneva as counsel on the MCOOL and US – Tuna II (Mexico) disputes. If you have any questions about the foregoing subject, please do not hesitate to contact us.